John Weatherall, a portfolio manager for the Capstone funds, says he is "very influenced" by history and by broad global events. "You have to take a world view and see where the undervaluations are and where risks are very high," says Weatherall, who brings to bear his four decades of investment experience.
As president of his Toronto-based firm, Scarthingmoor Asset Management Inc., Weatherall acts as sub-advisor to the equity portions ofCapstone Canadian Equity,Capstone Balanced, andCapstone Global Equity. He is responsible for $20 million in total assets under management with Capstone and approximately $50 million in total assets under management through his firm. The Capstone funds are managed by Morgan Meighen & Associates Inc., also of Toronto, with MM&A's Greg Eckle managing the fixed-income components of the funds advised by Weatherall.
Formerly chairman of TD Asset Management Inc., Weatherall officially retired from the company in January 1996. The next month, after the departure of David Knight, who had been manager ofTD Canadian Equity, Weatherall accepted TD's invitation to establish his own company.
Through Scarthingmoor, he began managing equities and precious metals assets for TD as a sub-advisor. His mandates included serving as lead manager of TD Canadian Equity.
He managed the fund until July 2001, watching it grow from $300 million to more than $1.5 billion. After a short-lived retirement, he was back in the business by July 2002, when he joined the Capstone group of funds.
The tiny $1-million Capstone Canadian Equity, launched in July 2003, is indicative of Weatherall's style. "I approach things with a value sense and a growth sense," he says.
The integrity and quality of company management are among Weatherall's key criteria. He will characteristically hold a concentrated portfolio of 20 to 30 stocks, while maintaining a minimal cash position. He will hold up to 10% in any one stock.
His sell discipline is based largely on value as it relates to the security's price-earnings ratio, but other factors come into play. An ideal time to sell, according to Weatherall, is after a favourable newspaper article that causes the stock to go up.
He credits his knowledge of base metals and, to some extent oils, for the strong performance of Capstone Canadian Equity in its first year. The fund returned 28.4% in the 12 months to Aug. 31, 2004, compared with the category median of 11.5%
Weatherall continues to favour energy stocks. Reflecting his view that oil reserves are becoming tight, not only globally but in Canada and the U.S., Capstone Canadian Equity recently held a 26% weighting in energy and Capstone Global Equity, a 20.9% weighting.
Foreign stocks find favour with Weatherall, who says they enable him to enhance returns and diminish volatility. As of Aug. 31, Capstone Canadian Equity held 21.6% of its assets in foreign equities.
Weatherall brings an eclectic and successful background to his newest employer. In 1955, after graduating from Cambridge University with a degree in engineering, he worked for Alcan Inc. in Kingston, Ont. In 1958, he joined auto-parts manufacturer Ontario Steel.
In 1962, Weatherall got his start in the investment industry when he was transferred to Jones Heward Investment Counsel Inc. in Montreal as an analyst. At the time, Jones Heward was an Ontario Steel affiliate.
In the early 1970s, Weatherall received the CFA designation. In 1976, he joined Greenshields, which later became Richardson Greenshields, and ran institutional equity research. He subsequently moved with the firm from Montreal to Toronto in 1978.
In late 1982, he moved to Wood Gundy in the same position but on a larger scale. Then, in 1990, the Toronto Dominion Bank asked him to run its investments, first as vice-president, investments, and then as chairman of TD Asset Management.
At Morgan Meighen, Weatherall works with a team of seven managers/analysts, but the final decision is his. After managing billion-dollar portfolios, he enjoys the greater flexibility of running smaller funds. "If you run a big portfolio, you become a prisoner of it, you have to have a support staff," he says.
